Lecture 7

Question 1

pressure to disperse configuration and adapt coordination

Answer 1

Local responsiveness

Question 1

pressure to standardize and concentrate configuration

Answer 1

Global integration

Question 2

What drives global integration

Answer 2

• Globalization helps standardize consumer preferences
• Markets are globalizing and they generate high-touch products
• Technology enables mass standardization
• Economies of scale render products cheaper to produce

Question 3

What are the pressures for local responsiveness?

Answer 3

• Consumer divergence
• Cultural specificity and historical legacy
• Nationalism
• Host government policies (ex.: tax regimes, business regulations, grants and incentives offered to companies)

Question 4

International Strategy

Answer 4

• leverages a company’s core competencies into foreign markets
• critical elements of the value chain are centralized at headquarters

Question 5

International Strategy works well when…

Answer 5

• the firm has core competencies that foreign rivals lack,
  – there are no significant economic pressures for global integration,
  – local responsiveness is not crucial.

Question 6

Low pressure for LR,
low pressure for global integration

Answer 6

International strategy

Question 7

Multidomestic strategy

Answer 7

– emphasizes responsiveness to the unique circumstances of a
country’s market
– value added activities are adapted to local markets

Question 8

Multidomestic strategy works well when…

Answer 8

– companies are relatively strong at subsidiary level,
– capacity to respond locally is important,
– there are no significant economic pressures for global integration.

Question 9

High pressure LR,
low pressure for global integration

Answer 9

Multidomestic strategy

Question 10

International strategy - problem

Answer 10

too much concentration at HQ and little input from foreign subsidiaries. Opportunities may be missed.

Question 11

Multidomestic strategy - problem

Answer 11

It is a costly strategy to implement due to need of adaptation to
local market characteristics

Question 12

Global strategy

Answer 12

– makes standardized products that are marketed with little
adaptation to local conditions
– exploits location economies and captures scale economies

Question 13

Global strategy works well when…

Answer 13

– the MNE is the cost leader,
– worldwide standardization is possible,
– there are large scale economies available to be captured,
– local responsiveness is not crucial.

Question 14

low pressure LR,
high pressure global integration

Answer 14

Global strategy

Question 15

Global strategy - problem

Answer 15

cost reductions and standardization do not allow for adaptation to local markets

Question 16

Transnational strategy

Answer 16

– leverages core competencies worldwide, reduces costs by exploiting location economies, and adapts to local conditions

Question 17

Transnational strategy works well when…

Answer 17

– global learning is emphasized,
– knowledge flows within the company,
– there are sophisticated internal management and control systems,
– capacity to respond locally is important,
– there are large scale economies available to be captured.

Question 18

High pressure LR,
high pressure global integration

Answer 18

Transnational strategy

Question 19

Transnational strategy - problem

Answer 19

It is complicated and difficult to implement.